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May 19, 2009

GBP/USD Crosses Through EMA (200) At 1.5404

The 200 day moving average has great significance in the world of forex trading and so it's interesting to observe that the GBP/USD pair has today crossed through this important level (1.5404). To put it into context the last time it was above this line was 31 July 2008.

This doesn't necessarily mean we should all be piling into long positions because the price will often breach this line temporarily before reversing back down again, but it's worth paying attention to see how the market reacts to this crossover.

If we see sustained buying and we break through the weak resistance level of 1.5724 (the highest high in the last 6 months or so, dating back to 17 December 2008) then we could be well on the way to 1.60 or 1.70, as I discussed in a recent blog post.

However if we fall straight back through this level within the next few days, then it's quite conceivable that this EMA (200) could act as a major resistance point and the price could easily fall back down to the 1.40 - 1.45 area.

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